Ride-hailing could shift gears for B.C. taxi industry: UBC expert

Business, Law & Society

An all-party committee of Crown corporations is expected to release its recommendations on ride-hailing in B.C. on Thursday.

UBC Sauder Professor Thomas Ross, who presented to the committee last month, offers his thoughts on the future of ride-hailing in B.C., and how competition from companies like Uber and Lyft might affect the taxi industry.

How would the taxi industry be affected if ride-hailing was legal in B.C.?

While it depends on the regulations adopted for ride-hailing, there is little doubt the introduction of services from companies like Uber and Lyft will have a major impact on the established taxi industry. The incumbents will need to adapt to survive, and even then will probably end up as a smaller part of the industry. Ultimately, taxi companies work from a somewhat different business model that has its own strengths, so I believe some can survive and even thrive in a less-regulated, more competitive, environment.

How can the government soften the economic blow for the taxi industry?

There are a number of ways the province could do this, but in the process, I hope we don’t prevent new players from being able to exploit their disruptive innovations. For example, taxi stands, hotel queues, curb-hailing and servicing the airport could all be restricted to traditional taxis. Regulated minimum prices would provide some protection for taxi companies but this risks undoing much of the customer benefit of ride-hailing.

Some jurisdictions have contemplated special taxes for users of ride-hailing services to generate funds to compensate taxi license owners, but I find this approach troubling. The province could keep the regulatory requirements, such as driver background checks and training, for the two types of services roughly comparable to keep the playing field as level as possible.

Why has B.C. been so resistant to ride-hailing when these services have flourished in other cities like San Francisco, Los Angeles and New York?

I think the resistance here has a lot to do with the high level of organization of the traditional taxi industry, particularly the Lower Mainland. The industry’s members have a lot at stake and they have successfully pushed back against the new entrants. It appears that Vancouver in particular has a low number of taxis in service relative to demand and this, combined with a regulatory environment that does not allow price competition, has pushed medallion (the permit required to operate a taxi) values to extremely high levels. Taxi medallion holders have a large investment in the status quo and that has provided great incentive for them to resist change. And since new owners of these medallions paid sky-high prices for them before the threat of ride-hailing materialized, it’s easy to have sympathy for them.